DEFINITION of 'Social Security'

A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits include retirement income, disability income, Medicare and Medicaid, and death and survivorship benefits. Social Security is one of the largest government programs in the world, paying out hundreds of billions of dollars per year.

Based on the year someone was born, retirement benefits may begin as early as age 62 and as late as age 70. The amount of income received is based on "your average indexed monthly earnings" during the 35 years in which you earned the most.  Spouses are also eligible to receive Social Security benefits, even if they have limited or non-existent work histories. A divorced spouse can also receive spousal benefits, if the marriage lasted 10 years or longer.

BREAKING DOWN 'Social Security'

The original program was part of President Franklin D. Roosevelt's New Deal plan to lift the U.S. out of the Great Depression. Today, the program is funded through payroll taxes collected by employees and companies; monies are placed into the Social Security Trust Fund and payments are managed by the government along with the Federal Reserve Board.

Social Security has faced serious solvency issues for many decades; today's payments are made from current payroll contributions by workers who may not have money available for them when they retire. Social Security reform – whether through legislation, tax law changes, or privatization – has been a major political issue that draws strong opinions from different demographic segments.

Social Security faces the real threat of becoming insolvent because of factors such as longer life expectancies, a large Baby Boomer population currently entering retirement age, and inflation.

To learn more about Social Security, check out Can my spouse and children collect my Social Security when I die?  and Types of Social Security Benefits.

RELATED TERMS
  1. Social Security Benefits

    The monetary benefits received by retired workers who have paid ...
  2. Social Security Trust Fund

    An account used by the United States federal government to record ...
  3. Old Age, Survivors And Disability ...

    The official name for Social Security in the United States. The ...
  4. Outside Earnings

    Income that temporarily reduces a retired individual's Social ...
  5. Payroll Tax

    Payroll tax is a tax that an employer withholds and pays on behalf ...
  6. Actuarial Deficit

    The difference between future Social Security obligations and ...
Related Articles
  1. Retirement

    8 Types of Americans Who Won't Get Social Security

    Most Americans eventually get Social Security retirement benefits. Those who don't need a solid Plan B.
  2. Retirement

    Common Questions About Social Security

    Find answers to the 10 Social Security questions that most people ask, from how to apply for benefits to how secure the system is.
  3. Retirement

    4 Things That Are Reducing Your Social Security

    Worried about Social Security dwindling? We discuss four ways it’s already happening.
  4. Retirement

    How Social Security Benefits Are Estimated & Taxed

    The Social Security check you'll get depends on your work history, when you start claiming a benefit and these other factors.
  5. Financial Advisor

    What Will My Social Security Check Look Like?

    It's important to know what your Social Security check will look like in retirement. Here's how you can figure it out.
  6. Retirement

    How Social Security Will Change In 2015

    The average retiree’s check will rise by 1.7% in 2015, the Social Security Administration says. And the ceiling on taxable earnings will rise, as well.
  7. Retirement

    Are Social Security Benefits a Form of Socialism?

    Socialism is a loaded word in the U.S., but Social Security, one of the nation's most popular benefit programs, is wholly government-run.
  8. Retirement

    What Will Social Security Look Like When You Retire?

    Many workers are not confident that Social Security will be around during their retirement. Here's what you need to know about its future.
  9. Financial Advisor

    IRA Holders: How to Avoid this Huge Mistake

    Here's why using your IRA funds to delay taking Social Security benefits may be a good option for more financial security in retirement.
  10. Retirement

    Top 3 Challenges Facing Social Security

    The first official Social Security card was given out in 1936 and while the system is still paying out, a lot has changed.
Hot Definitions
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
  2. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  3. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability ...
  4. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  5. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an insurance and an investment component. The insurance component ...
  6. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
Trading Center